Why Is HCP (HCP) Up 2.8% Since Last Earnings Report?

A month has gone by since the last earnings report for HCP (HCP). Shares have added about 2.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is HCP due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

HCP's Q1 FFO Surpasses, Revenues Miss Estimates, NOI Up

HCP reported first-quarter 2019 FFO as adjusted of 44 cents per share, surpassing the Zacks Consensus Estimate of 43 cents. Comparable FFO as adjusted in the prior-year quarter was 48 cents per share.

Results were supported by decent performance of the company’s life-science and medical-office segment. However, decline in rental and related revenues unfavorably impacted top-line growth.

This healthcare REIT generated revenues of $436.1 million, missing the Zacks Consensus Estimate of $442.1 million. Further, the figure comes in lower than the year-ago number of $479.2 million.

Behind the Headlines

HCP witnessed 3% year-over-year rise in the three-month cash SPP net operating income (NOI). There was 6.5% growth in life-science cash NOI, 4.2% rise in the medical office segment and 2.4% advancement in other non-reportable segments. However, these positives were partly offset by a 0.7% decrease in seniors-housing portfolio cash NOI.

During the first quarter, HCP purchased a portfolio of nine recently-built, continuum of care, senior housing communities for $445 million. The portfolio is concentrated primarily in Florida and operated by Discovery Senior Living.

During the March-end quarter, 18 seniors-housing communities, operated by Sunrise Senior Living, were converted from triple-net leases to RIDEA structures.

HCP had cash and cash equivalents of around $120.1 million as of Dec 31, 2019, significantly up from $110.8 million recorded at the end of 2018. Additionally, the company ended the first quarter with $1.7 billion available under its $2-billion credit facility.

Outlook

HCP reiterated its 2019 FFO as adjusted guidance at $1.70-$1.76 per share.

Furthermore, the company expects 2019 SPP cash NOI growth for total portfolio to be 1.25-2.75%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, HCP has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, HCP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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